The Finance 202: Overhauling the tax code is more complicated than the Trump administration expected

Three months ago, Treasury Secretary Steven Mnuchin said overhauling the tax code would prove easier than replacing Obamacare. “It’s a lot simpler,” he said. Add the fact that it isn’t to the list of rude awakenings for a novice administration.

The project of remaking the U.S. tax system — a defining Republican priority, seemingly ripe for action from an all-Republican government — remains badly stalled. And the window for action is closing.

House Republicans are still debating whether their plan should include a border adjustment tax. The idea has been a pillar of the approach favored by Speaker Paul D. Ryan (R-Wisc.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) because it would boost American exporters, and, least as importantly, generate an estimated $1 trillion over the next decade that would go toward lowering overall rates.

House Speaker Paul Ryan (R-Wisc.). (EPA/Michael Reynolds)

But the proposal has faced resistance from multiple corners of the House Republican conference, including on the Ways and Means committee itself. Brady last week floated phasing in the tax over five years. That hasn’t won it new fans, and it continues to be a nonstarter in the Senate. That House Republican leaders haven’t moved on testifies more than anything to the lack of viable alternatives advanced by Senate and administration negotiators.

On Tuesday, Ryan will deliver what his office is billing as his first major speech on taxes. The address to the National Association of Manufacturers comes a year to the week since the rollout of the House GOP’s tax blueprint. Ryan won’t get in the weeds, but “he will talk about what tax reform looks like, not just the benefits,” according to an aide.

Senate Republicans haven’t helped the project get out of the blocks. And for the rest of the month, at least, they’re likely to stay preoccupied with their own Obamacare repeal-and-replace effort, which Senate Majority Leader Mitch McConnell (R-Ky.) has said he’d like to bring to the floor before the July Fourth recess. Senate Finance Committee Chairman Orrin Hatch (R-Utah) on Friday put out a call for stakeholder input on taxes, asking for submissions by July 17.

In the meantime, some GOP senators are working on their own proposals. Sen. Ron Johnson (R-Wisc.) is exploring a plan to eliminate corporate taxes altogether and replace them with revenue from taxing dividends and capital gains as ordinary income. Others are digging through a 2014 draft from then-Ways and Means Committee Chairman Dave Camp (R-Mich.) for new sources of revenue.

Sen. Ron Johnson (R-Wisc.).(AP Photo/Steve Helber)

Republicans leaders in the Capitol are meant to be working with the administration on forging consensus. “It seems they’re still far apart on what an agreement could be,” says Jonathan Traub, a former staff director for Ways and Means Republicans now with Deloitte. And the clock is working against them. Even if a rough sketch of a plan comes together by the end of the summer, it will be jockeying for attention in an already-crowded fall calendar. Republicans returning from the August recess could face intramural showdowns over a new budget resolution, a debt ceiling hike and a government funding package.

Then, of course, there’s the Big Distraction, which President Trump himself acknowledged on Sunday:

The MAKE AMERICA GREAT AGAIN agenda is doing very well despite the distraction of the Witch Hunt. Many new jobs, high business enthusiasm,..

None of the key negotiators is calling for abandoning a comprehensive approach, yet. Mnuchin, for example, told a real-estate industry conference last week he remains committed to getting a major deal done. But given the obstacles, Traub says he places the chances of a comprehensive overhaul at one-in-five. He rates a simple tax cut as slightly more likely. "And the single most probable outcome," he says, "is doing nothing at all."

You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.

President Trump, with first lady Melania, waves as he walks on the South Lawn. (AP Photo/Manuel Balce Ceneta)

— The Trump administration plans to nominate Jim Clinger, currently chief counsel for the House Financial Services Committee, to lead the Federal Deposit Insurance Corp. The decision lines up a more industry-friendly figure to lead the agency that helps oversee living wills and designate non-bank institutions as “systemically important,” among a range of other regulatory functions. If he’s confirmed, Clinger would take over as FDIC chairman in November and serve a five-year term.

— Elsewhere, the Trump administration is still struggling to fill out its team in the executive branch. The escalating federal probe into Russia’s election meddling is making it harder to find people willing to serve, my colleagues Lisa Rein and Abby Phillip report. Trump is lagging behind the pace set by both of his predecessors: At this point, he has 43 confirmed appointees to senior posts, compared with the 151 top political appointees confirmed by mid-June in President Barack Obama’s first term and the 130 under President George W. Bush.

The man in question is Rod Rosenstein, the deputy attorney general, who's overseeing the special counsel probe. If Rosenstein is fired — or forced to recuse himself — the task of overseeing the investigation would fall to the department's third-ranking official, Rachel Brand. And Brand has a record of battling regulation, having served as chief counsel for regulatory litigation for the U.S. Chamber Litigation Center. The work earned her some knocks from Democrats during her confirmation hearing earlier this year, with Sen. Patrick Leady (D-Vt.) calling out her "heavily skewed, pro-corporate agenda."

— Trump continues adding firepower to his personal legal team, including, most recently, John Dowd. Dowd once represented Raj Rajaratnam, the Galleon Group hedge fund founder now serving an 11-year prison term for insider trading. The prosecutor in that case: Preet Bharara, the U.S. Attorney for the Southern District of New York, until Trump fired him in December. Bharara has emerged since as a freewheeling Twitter presence, and he took the news of Dowd joining Trump's team as an opportunity to post this flashback, from when CNBC caught his salty reaction to Rajaratnam's conviction:

The Whole Foods Market in Midtown New York is seen on June 16, 2017. (AFP PHOTO / Timothy A. Clary)

— Amazon’s $13.7 billion deal to buy Whole Foods, announced Friday, was the talk of the weekend, with some suggesting the scale of the deal brings political considerations that deserve special scrutiny. Labor interests, for example, worried whether the tech giant’s takeover of the upscale grocer will spell the automation of its workforce. Consumers, too, could see changes: Amazon on May 30 was awarded a patent for technology that allows it to block shoppers from comparing prices on their smart phones while in a store.

A Congressman representing Silicon Valley said he has concerns:

I’m deeply worried about what this deal means for suppliers and neighborhood grocery stores. https://t.co/UCTBX5hZo7

The tie-up could also bring "radical retail experiments" that change how people buy groceries and everything else, the AP writes. One possibility: "Amazon could try to use automation and data analysis to draw more customers to stores while helping Whole Foods cut costs and perhaps prices. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the U.K. could be turned into distribution hubs — not just for delivering groceries but as pickup centers for online orders." But solving the "last mile" logistics problem of getting fresh groceries into homes presents a new challenge for Amazon.

Here's Rep. John Delaney (D-Md.), the only former CEO of a publicly traded company serving in Congress:

— Amazon CEO Jeff Bezos (who also owns the Washington Post) is among the tech leaders headed to the White House todayto discuss updating federal computer systems, improving cybersecurity, and streamlining government websites. Also expected to attend: Apple Inc. CEO Tim Cook and Microsoft Corp. CEO Satya Nadella. The session is the latest in a parade of CEO visits to 1600 Penn., raising the question, though chief executives have a spotty record of getting their views across to the president.

NEW ORLEANS -- An aggressive, pro-consumer flood insurance reform bill is winning sponsors from coastal state senators spanning the full political spectrum, but Louisiana’s John Kennedy is bracing for major pushback from the insurance industry and lawmakers from states that rarely see flooding.

WWL

THE REGULATORS

Federal Reserve Chair Janet Yellen. (AP Photo/Susan Walsh)

— Banks will be getting a better look later this month at how the Federal Reserve conducts its annual stress tests. The Fed will provide specific examples from past capital planning processes, With the decision to tip the central bank's hand, Fed chair Janet Yellen is answering a long-running line of complaints from the industry about what has been a black-box approach.

House Speaker Paul Ryan waves to the crowd while campaigning for Republican candidate in Georgia. (AP Photo/David Goldman)

Today

The Atlantic is holding a discussion on “The Rise of Populism and Nationalism.

Coming Up

The Brookings Institution is holding an event on “why economic policy so often so often comes up short” on Tuesday with former Rep. Barney Frank (D-Mass.)

House Speaker Paul D. Ryan will give a speech on tax reform at the National Association of Manufacturers summit on Tuesday and will take part in a q-and-a session following the speech. Vice President Pence is also scheduled to speak Tuesday and House Majority Leader Kevin McCarthy will speak at the summit on Wednesday.

The Ninth Annual Congressional Women’s Softball Game will take place on Wednesday.

The House Appropriations’ Subcommittee on Financial Services and General Government will hold a budget hearing with OMB Director Mick Mulvaney on Wednesday.

The Senate Appropriations Subcommittee on the Legislative Branch will hold a hearing on the budget requests for the Government Accountability Office and the Congressional Budget Office on Wednesday.

House Financial Services Committee will continue marking up a bill on Wednesday to reauthorize the National Flood Insurance Program.

The Senate Committee on Banking, Housing and Urban Affairs will have a hearing on “Fostering Economic Growth: Regulator Perspective” on Thursday.

The House Ways and Means Committee will hold a hearing on US trade policy agenda with US Trade Representative Robert Lighthizer on Thursday.

The SEC’s Investor Advisory Committee will hold a meeting on Thursday.